Beijing's economy

Going for gold

The Olympics have not brought Beijing’s businesses the boom they hoped for

YABAO ROAD in Beijing’s embassy district is normally bustling. Russian traders scour its wholesale shops for furs and boots. Hawkers throng the pavements. The street is jammed with taxis and pedicabs. But the Olympic games have begun. Yabao Road is now strangely quiet.

Only a few months ago many shopkeepers, restaurants and hotels were expecting these to be boom times as big-spending foreigners flocked in for the games. Today many businessmen in and around the capital are disgruntled. So too are other citizens who find that even some outdoor food markets have been closed as part of an Olympic spruce-up.

This should be a busy season for Yabao Road, as Russians arrive to make bulk orders of clothing for the winter and other cheap goods. But Chinese traders say the Russians, like other foreigners, have suffered from the tighter visa requirements introduced by China in the build-up to the games. They say police checkpoints ringing the city and restrictions on lorry traffic entering Beijing have made it much more difficult to bring in goods. One shipping-company manager says that demand from traders for commercial space in Yabao Road has fallen sharply.

Official predictions for foreign visitor numbers in August are vague. Figures ranging from 400,000 to 500,000 are commonly cited (in August 2007 there were 420,000 visits by foreigners). But for many months these estimates have hardly been revised, despite signs that there are far fewer arrivals from abroad than expected. In June visits to Beijing by foreigners (including citizens of Hong Kong, Macau and Taiwan) were down by nearly 20% compared with June 2007. Figures this week showed that in July they fell by more than 30% compared with last year, to 270,000, with Russian arrivals down by 47%.

Officials say one-fifth of rooms at the city’s 120-odd designated Olympic hotels were unoccupied after the games started on August 8th (they finish on the 24th). But no figures have been published for the 700 others. Price-cutting at many hotels suggests there may be a glut of rooms. Some bars and restaurants say business is lacklustre too. The owner of one upmarket nightclub says he had been expecting a packed house “all night, every night up until dawn” during the games. But in fact business is much as usual.

At least the police are not rigorously enforcing a threatened ban on carousing after 2am. They have, however, cracked down on prostitution, depriving many of Beijing’s seedier bars and night-shift taxi drivers of business. Olympic traffic controls and security measures, as well as the lure of sport on television, seem to be keeping people at home anyway.

Manufacturers are also suffering more than they had expected. To curb pollution during the games, the authorities have closed all construction sites in Beijing as well as dozens of factories and quarries in and around the city for two months. Others have been ordered to cut production. Some, such as the Beijing Eastern Chemical Works, are keeping workers occupied by getting them to repair machinery. But at the nearby plant of Beijing East Asia Aluminium Industry, a worker says that hundreds of employees are staying at home on basic pay. The factory has not been ordered to shut, she says, but has had to close because of transport problems caused by the games. Officials have given warning that many more factories could be closed if more drastic measures are needed to clear the (still smoggy) air.

Many economists say the disruptions are unlikely to have a lasting impact on economic growth in the city. Last year Beijing’s output grew by 12.3%. In the first six months of 2008 it grew by 11% compared with the same period a year ago. Officials say this pace is likely to be maintained for the rest of the year, in line with a slight slowing of China’s overall growth-rate. JP Morgan Chase, an investment bank, said in a recent research note that industrial and construction activity hit by the games should “rebound” after the Olympics. In the meantime, the games are not winning any medals from Beijing’s businessmen.

Caucasian pipelines

The dangers of the safe route

Georgia’s pipelines to the West weren’t bombed but they remain vulnerable

IT’S not just the Russian-Georgian conflict that has made August such a rotten month for the West’s favourite oil pipeline. On August 5th a pumping station on the 1,100-mile (1,760km) Baku-Tbilisi-Ceyhan (BTC) pipeline in eastern Turkey was set ablaze. The PKK Kurdish separatists claimed responsibility. The entire route, which had been carrying 850,000 barrels of Caspian crude oil a day to Western markets, shut down and world oil prices, which had been falling, nudged up again. BP, which spent $4 billion on BTC and still manages it, put a brave face on things, saying that the disruption would be temporary. But the station was still burning when Georgia and Russia went to war two days later.

The company’s other oil pipeline, Baku-Supsa, carrying crude to Georgia’s Black Sea coast (now blockaded by Russian warships), had only recently re-opened but was also forced to shut down. On August 12th, even as the conflict was fading, BP stopped putting gas into the Baku-Erzurum gas pipeline. The only pipeline from Azerbaijan that was fully operational this week is the one running through Russian soil to the port of Novorossiisk.

For the past decade Georgia has been championed as a reliable country through which new pipelines, safely controlled by Western companies, could bypass both Russia and Iran. On the face of it, the past week has made a mockery of that claim. But not completely. Georgia will point out that its energy infrastructure survived the war unscathed: no pipeline was bombed. Russia, mindful of the need for good relations with Azerbaijan and Turkey, has been careful to point out that this was not an oil war.

Yet the crisis—including the dangerously unresolved dispute between Armenia and Azerbaijan over Karabakh—raises wider issues. South Caucasus is supposed to be the location for the next generation of so-called “fourth corridor” projects, by means of which Western strategists dream of ending Europe’s dependence on Russian gas and getting Caspian gas to European markets.

The jewel in this scheme, the Nabucco pipeline—designed to ship Caspian gas to Europe in 2013—is already in trouble for lack of unequivocal European support, a rival Russian scheme called South Stream and the fact that there is no major Western energy company based upstream in Turkmenistan to lobby for the deal. One of the first foreign-policy initiatives by Russia’s president, Dmitry Medvedev, was to court Azerbaijani and Turkmen leaders in order to persuade them to sell their gas to his country. With an eye on events in Georgia, they must now decide how to respond to his friendly advice.

Counter-terrorism

Taking on terrorists

Is military force the best means to defeat terrorist groups?

MANY studies have asked how terrorist groups are born; relatively few have described how such groups are best put out of business. A recent effort to do the latter, by RAND Corporation, an American think-tank, is therefore welcome. It considers the fate of some 650 groups (defined widely), between 1968 and 2006, asking in particular what put an end to them. In the process it casts some useful light on a hoary old question of counterterrorism: whether military force or smart policing is the more effective method for tackling terrorists and insurgents.

Proponents of military force have quite a bit to cheer at the moment. Most notably there is the success of the military surge in Iraq in tackling al-Qaeda and other insurgents (other changes, such as a shift in allegiance of Sunnis, have helped too). In Sri Lanka, in January, President Mahinda Rajapakse formally scrapped a cease-fire agreement that had been signed in 2002 with the Liberation Tigers of Tamil Eelam. The campaign against the separatists has been growing more intense, with the government forces claiming that the Tigers will be defeated next year. On Friday August 15th Sri Lankan soldiers said that they had killed 26 rebels in fighting in the far north of the island.

Colombia's president, Alvaro Uribe, has similarly pursued the military option against the FARC, managing to kill thousands of the group's members, including several leaders. In March Colombian forces (with American training and a heavy dose of intelligence work) bombed a jungle camp in Ecuador, killing Raul Reyes, an important figure in the movement, and recovering computers containing valuable information. Then in July Colombian forces freed Ingrid Betancourt, a former candidate for president, and 14 others who had been held hostage by the FARC for several years. Mr Uribe had resisted calls for negotiations to secure their release.

According to RAND, some 20% of the insurgencies it considered have been ended through the use of overwhelming military might. But such force seems to tell only in particular situations. Where opponents are large, organised like armies and occupy territory, military methods are likely to be more effective. Insurgencies, however, are a specific set of conflicts, comparable to civil wars where hundreds or more have died on both sides involved.

When it comes to terrorist groups more broadly, military might is less useful. As the RAND study points out, the vast majority of terrorist groups have fewer than 100 members. It considered groups ranging from the tiny, such as the Oklahoma City bombers, to the massive, such as Aum Shinrikyo, the movement responsible for a nerve-gas attack on Tokyo's subway in 1995. For isolated cells and other groups, conventional military weapons are unwieldy and often ineffective. The think-tank says that military action put an end to only 7% of the terrorist groups that it looked at.

RAND concludes that police sleuthing and more intelligence work are often more useful methods when tackling smaller groups and organisations—perhaps including al-Qaeda—that operate in the shadows. Of the 268 terrorist organisations that folded, the most common reason was a change of method in favour of a political process. This happened in 43% of cases and was mainly possible where groups had specific goals that might be accommodated. A similar number of groups—some 40%—were dismantled with the help of police and intelligence work.

The think-tank, which regularly conducts research for the Defence Department, therefore suggests that the current American strategy against terrorism is flawed. The report’s authors urge a “fundamental rethinking” of policies against al-Qaeda, arguing that America's campaign should no longer be waged as a “war on terror” but instead conducted as a “counter-terrorism” mission. The authors say that “there is no battlefield solution to terrorism”, saying intelligence and policing should get more attention.

One intriguing suggestion is that groups might be encouraged to splinter through outsiders’ intervention. Many observers have recently started to look at methods that might encourage disaffected members of terrorist groups to defect. A recent book by one of the founders of al-Qaeda, Sayyid Imam al-Sharif (better known as Dr Fadl) dismisses al-Qaeda's message and renounces the violence and aggression of the September 11th attacks. Others have looked into whether financial reasons and clashes with leadership can lead terrorists to leave.

The recommendations of the report are not just of interest to anti-terrorist organisations; their opponents may be worried that the insights can help to bring about their own demise. Possibly to guard against this possibility one jihadist apparently translated much of the RAND report and posted a copy online within only a few days of its original publication.